Appointment of Auditor
Section 224 of Companies Act reads about rules and regulations with regard to appointment of auditor to company. Those provisions can be studied under the following captions;
Appointment of First Auditor: First auditor to the Company will be appointed by first board of directors within one month from the date of incorporation. The auditor thus appointed will hold office till conclusion of first annual general meeting which will be held within 18 months from the date of incorporation. But it is not hard and fast rule. If first auditor is not thus appointed share holders will appoint first auditor at the general meeting.
Appointment by Share Holders: Share holders are proper authority to appoint auditor to Company. At every annual general meeting share holders appoint auditor to the Company by means of ordinary resolution. Company has to send intimation to auditor thus appointed within 7 days from the date of such meeting. Within 30 days auditor has to communicate to registrar of Companies whether he is accepting the audit or rejecting. The auditor thus appointed office till conclusion of next Annual General meeting. At next annual general meeting the same procedure will be repeated.
Important Sections of Auditing; The Companies Act, 1956
Section 224: Appointment and remuneration of auditors.
Section 224A: Auditor not to be appointed except with the approval of the company by special resolution in certain cases.
Section 225: Provisions as to resolutions for appointing or removing auditors.
Section 226: Qualifications and Disqualifications of the Auditor.
Section 227: Powers and Duties of Auditors.
Section 228: Audit of accounts of branch office of the company.
Section 229: Signature of Audit Report.
Section 230: Reading and inspection of auditor's report.
Section 231: Right of auditor to attend general meeting.
Section 232: Penalty for non compliance with Section 225 to Section 231.
Section 233: Penalty for non compliance by auditor with Section 227 to Section 229.
Section 233A: Power of Central Government to direct special audit in certain cases.
Section 233B: Audit of Cost Accounts in certain cases.
Appointment by Central Government: In case where auditor is not appointed by share holders at the annual general meeting. Such fact is to be Communicated by the Company to Central government, within 7 days of such meeting. Then Central government appoints auditor. The Auditor does appointed codes office till conclusion of next annual general meeting. If the fact of non-appointment of auditor is not Communicated to Central Government within 7 days of annual general meeting, every officer of the company will come across a penalty of Rs: 500/-
Appointment by Board: In case where Casual Vacancies arises in the place of auditor board of directors can appoint such Vacancy. Very importantly it should be noted that the Casual Vacancy should not be out of resignation by auditor. The auditor thus appointed by board, office till conclusion of next annual general meeting.
Appointment of Auditor to Government Company: According to Sec.619 of Companies act, Auditor to government company will be appointed by Central government by consulting auditor general of India. The Auditor thus appointed submits his report to Auditor General and Auditor General will submit the same to parliament.
Appointment requires Special Notice: As said above Auditors appointment requires only ordinary resolution. But Sec.224(A) of Companies act indicates a situation where appointment of auditor requires special notice. If 25% or more capital of the Company is Contributed by Central Government or State Government or Central and State Government`s jointly or two or more State governments or public financial institutions or Nationalized Banks or Insurance Companies carrying on General Insurance Companies, appointment of Auditor requires a special notice.
Reappointment of Auditor
At annual general meeting retiring auditor may be re-appointed. In actual practice appointment of retiring auditor takes place. But it should be noted that retiring auditor has no right to claim re-appointment. The following are situations where re-appointment of retiring auditor will not take place;
- In case where retiring auditor has Communicated his unwillingness for re-appointment.
- In case where share holders have given a notice to the Company not to re-appoint retiring auditor.
- In case where retiring auditor comes across any disqualification under Sec. 226 (3)
- In case where share holders have suggested a person in place of retiring auditor and such person comes across death etc.
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